After a tumultuous 2011 in which the company got a new owner as well as a settlement of a series of investor claims involving fraudulent investments, Securities America has had a chance this year to fully focus on executing its business strategy.
Now part of Ladenburg Thalmann, which bought Securities America from Ameriprise for $150 million, CEO Jim Nagengast says key objectives are to hold on to advisors affiliated with the firm and to attract new ones. Nagengast also wants Securities America - the nation's eighth-largest broker-dealer in the latest FP50 rankings - to distinguish itself in a crowded marketplace by focusing on income distribution in retirement.
Financial Planning Editor-in-Chief Scott Wenger visited Nagengast, who's logged two years in the top job, and other Securities America executives at its headquarters in Omaha, Neb., to talk about the firm's plans and its strategies. Highlights are below and at financial-planning.com/video.
How has the takeover by Ladenburg Thalmann changed Securities America's value proposition for advisors?
As we went through this transaction and transition, it really enhanced our value proposition: Some great things added to our tool belt in terms of additional asset management capabilities, access to proprietary research, investment banking services and also in advisor-friendly trust services. That's one of the areas we've hit some home runs early on, a real uptake by our advisors of the trust services offered by Ladenburg.
It's a time of great transition in the industry, with many advisors moving away from wirehouses and also getting poached by firms with which you compete. Why should they consider coming to Securities America? And for those already there, why should they stay?
Our value proposition is some of the industry's leading technology, great practice management, and then also our leadership in retirement income distribution. We just see, with the demographics of the country and the investing climate, having someone who's a leader in retirement income distribution is becoming more and more important. And we're really helping advisors become the retirement income distribution expert in their community.
Let's drill down on that. For many years, advisors have focused on asset accumulation, trying to build wealth. As the baby boomer generation starts to retire in large numbers, how can advisors make that switch to being retirement income distribution experts, and why is that so imperative at this time?
First of all, we work with advisors to train them. We have an educational program to help them become that expert. And then secondly, we have all the marketing materials, seminar material, point-of-sale pieces that are important. And then we back that up with the software to help develop the plan, monitor the plan, progress against the plan. And also, we've built a retirement income distribution desk so that we can help advisors build those plans if they want to spend more time meeting with advisors and leave some of the heavy lifting to us. So we really have the ability to provide the complete support an advisor might need.
And we see again, with the demographics and this low interest rate environment, managing assets in the distribution phase is more and more critical. With the low interest rate environment, finding guaranteed income is a huge issue; getting some yield on those assets. And, as we say, you only have one chance to get retirement income distribution right. You can be in the accumulation phase, and you can always work a few more years if you have a down market, but when you go into retirement, you only have one chance to get it right.
Will focusing on this expertise be your organic growth engine?
We think it's important for advisors to help them grow their business and help do what's right for clients. And as I would say, if you do what's in the best interests of the client, good things are going to happen for your practice. And so we find we have advisors out there who are talking to pre-retirees and retirees about something different than every other advisor. And we think that's important. A lot of times a client typically has two to three investing relationships. And surveys show at retirement, that goes to one advice relationship. That's what I tell our advisors: That retirement income distribution is about being that winner, it's about being the one advisor.
Does Securities America plan to be active on acquisitions?
We are active in looking, whether it's large acquisitions or small acquisitions. We see a real opportunity in the marketplace for what we call small broker-dealer wind-down opportunities, where those broker-dealers may become branches of us, or affiliated with us. A lot of those opportunities is the ability for them to continue what they do best, which is develop the relationship with advisors, and continue to recruit and develop advisors, while we take over some of the back-office responsibilities - all the technology, the compliance infrastructure. And we've built some systems, we're very good at servicing large branches. We see a real opportunity out there for some small broker-dealers becoming what we call super branches of Securities America.
In just a few short years, Ladenburg built a substantial network with your sister companies Investacorp and Triad. To what extent does Ladenburg leverage those relationships to grow the business?
I think with our network of broker-dealers, we're able to work together on a variety of things - due diligence; bringing product expertise together really enhances the expertise and capabilities in all the broker-dealers. Also, sharing of best practices in compliance, risk management; and then also bringing the scale together for additional asset management capabilities. That's one of the things Ladenburg has some strengths in - and able to offer our advisors - is additional asset management capabilities. By making that available across the whole network, we really are able to have some additional capabilities not seen elsewhere.
Strategically, you talk a lot about spending on technology. In what way has the firm benefited from technology, and has it enhanced the due diligence after the settlements derived from the 2010 lawsuits [in which investors claimed they were misled, leading to multimillion-dollar losses]?
We're very committed to technology, committed to being the industry leader in technology. We think technology transcends this business, from running the home office, to running an advisor's efficient practice, to marketing to new clients. I think that is further echoed by Ladenburg's commitment, and now being able to spread that technology investment across a much larger infrastructure. In terms of what we've done on compliance supervision, we like to think we've built an industry-leading platform for state-of-the-art compliance technology. And part of that is monitoring product concentration, the amount of sales in any one sponsor or sales by a client, sales by rep, etc. As a leading broker-dealer, you've got to be able to provide those solutions.
Scott Wenger is editorial director of SourceMedia's Investment Advisor Group and editor-in-chief of Financial Planning.